Author: admin

Authored by Martin Sieff via The Strategiuc Culture Foundation,

Donald Trump’s millions of detractors without doubt see him as The Mad Hatter: But, no: He’s Alice. The President of the United States has disappeared down the rabbit hole and he’s in Wonderland – Complete with a Red Queen (Nancy Pelosi) shouting “Off with his head!”

The great mistake foreign observers make observing the latest farce in Washington is assuming that there must be some order, rationality and linear logic behind it. There is none. It is Politics According to the Marx Brothers

This is a show trial – incompetently planned and directed with hundreds of crazed scriptwriters: The Democratic members of the House Judiciary Committee, their staffs and the salivating Mainstream US Media are writing and rewriting the script as they go along.

If one is to believe the Mainstream Media, who avidly take this bizarre cartoon seriously, enough evidence has already been established to clearly convict Trump of seeking to push an inquiry into the prima facie evidence of corruption on the part of the son of a former vice president and the leading Democratic presidential candidate.

Is this supposed to be criminal or shocking? What is Trump even accused of doing? He is accused of cautiously investigating the possibility of corruption in a sensitive and clearly unstable US ally whose government openly tried to influence the 2016 US presidential election (as Russia did NOT!)

Indeed, top Ukrainian government officials before the 2016 vote openly published opinion articles in the most prestigious US outlets viciously attacking candidate Donald Trump and calling for the election of his opponent Hillary Clinton.

Far from endangering the security of Ukraine and withholding US aid, Trump has unwisely approved a flood of lethal US weapons, most especially Javelin missiles for Kiev.

This massive arms transfer gravely increases the potential threat to the breakaway provinces of Lugansk and Donetsk. It therefore also automatically ratchets up the threat of direct war between the United States and Russia – a danger of inconceivable horror that the “Hate Trump!” and “Hate Russia!” fanatics in Washington are insanely blind to.

The metaphor of the Gadarene Swine is repeatedly overused: But only because it works. It is true. The Hate Trump fanatics in the US Congress and in the US Media are stampeding the human race towards an annihilating nuclear war that nobody else remotely wants.

Trump in a very basic way has no one to blame but himself for this horrendous state of affairs in Wonderland. He surrounded himself with Russia-hating Armchair Warriors from Fiona Hill to John Bolton and Kurt Volker. So he should not be surprised that to a man – and woman – they have betrayed him.

Trump did not try to roll back the dark influence of the Deep State, the Jabberwock monster of his Wonderland. So he should not be surprised that now the Deep State Jabberwock is once again trying to eat him.

Former US Ambassador to Kiev Marie Jovanovich and former National Security Council official Alexander Vindman both consistently and relentlessly supported the illegal gangster regime in Kiev which only took power by a violent coup in 2014 by toppling the democratically elected president of the nation.

Yet Jovanovich and Vindman have never been held to account for their double standards and betrayal of their primary loyalty to the government of the United States. They know they are safe: They live in Wonderland, where treason is patriotism and loyalty to the law and Constitution of the Nation is the most unforgivable of crimes.

For it is the Elected President of the United States who sets all foreign policy: Or at least is supposed to. And it is the diplomatic and security apparatus of the United States that is presumed to implement that policy loyally and without questioning it.

Also, all ambassadors explicitly serve at the pleasure of the president and Trump should have fired Jovanovich as soon as he took office. She had been appointed by his predecessor Barack Obama, with the blessing of his own foreign policy guru, Polish-American and Russia-hating former National Security Adviser Zbigniew Brzezinski to implement a policy that Trump was explicitly elected to abandon – reckless, potentially highly dangerous unconditional US support for the unstable coup government in Kiev.

But none of this matters: We are Inside the Beltway and Down the Rabbit Hole. We are in Washington. And Washington is Wonderland. Lewis Carroll and his Alice would have understood immediately.

Roughly a week after Joe Biden alienated himself from 80% of liberals who want marijuana legalized when he vowed to keep it illegal until science figures out whether it’s a gateway drug, the former Vice President backpedaled so hard on a Monday follow-up question we’d be surprised if he doesn’t have whiplash.

To recap, Biden told a Las Vegas audience on Saturday “The truth of the matter is, there’s not nearly been enough evidence that has been acquired as to whether or not it is a gateway drug,” adding “It’s a debate, and I want a lot more before I legalize it nationally. I want to make sure we know a lot more about the science behind it.

Did…did Booker just say he thought Biden was high? 😳 pic.twitter.com/3OaUmnjLrJ

— The Daily Wire (@realDailyWire) November 21, 2019

On Monday, Biden flip-flopped, telling the Nevada Independent‘s Megan Messerly whetherhe thought he was wrong to suggest that marijuana might be a gateway drug: “Well I didn’t. I said some say it’s a potway [sic] drug – or pot was a gateway drug,” adding “what I said was an I’ve been talking about this for some time now, anyone, anyone, first of all it should be totally decriminalized number one, number two, anyone who has been convicted of an offense or using pot, their record should be wiped totally clean, completely clean, so they don[‘t even have to if asked if they’ve ever been arrested, they will not have to say yes.”

Biden continued (we suggest reading slowly):

“With regard to the total legalization of it,” which is somehow different from the phrase “totally decriminalized” he used moments before, “there are some in the medical community who say it needs to be made a Schedule II drug so there can be more studies, as not whether it is a gateway drug but whether or not it when used in other combinations may have a negative impact on people overcoming other problems including in fact on young people in terms of brain development, a whole range of things that are beyond my expertise. Except there are serious medial folks who say we sho9uld study it more. Not that we shouldn’t, not that we should make it illegal, that we should be in a position where we criminalize it but where we should just look at it. And you know I constantly am pointing out that Donald Trump, fiction over science, well there’s enough serious scientists who say let’s, give us a little more chance to actually study it. And that’s what I’ve said.”

Here’s @JoeBiden‘s full answer to me on whether he was wrong to suggest pot might be a gateway drug at a recent Las Vegas town hall.

“I don’t think it is a gateway drug. There’s no evidence I’ve seen that suggests that,” he said. pic.twitter.com/DJzM7LutRy

— Megan Messerly (@meganmesserly) November 25, 2019

Wow…

Trump should just quietly prop a mirror on stage, walk away, and let nature take its course. pic.twitter.com/BWvhMgsU4a

— Rachel Deckard (@deckard_rachel) November 25, 2019

Authored by Donald Boudreaux via The American Institute for Economic Research,

1. Why do so many American Progressives, fearing that rich people abuse state power, aim to reduce the riches of rich people, instead of the state power that Progressives admit is subject to being abused?

2. Why do so many American Progressives wish to put even larger swathes of our lives under political control given their belief that politics is so very easily corrupted by oligarchs and big-money donors?

3. Why do so many American Progressives – fearful of corporate power and understandably dismayed by cronyism – support tariffs and export subsidies (such as those dispensed by the U.S. Export-Import Bank)? After all, each tariff and every cent of subsidy is an unearned privilege granted by government to corporations at the expense of consumers, workers, and households – a privilege that creates corporate power and fuels abuse by corporations that would otherwise not arise.

4. Why do so many American Progressives, with one breath, criticize free-market economists for allegedly failing to take account of the immense importance that we humans attach to community, cultural identity, and other non-monetary values and features of our existence, and yet with the next breath talk as if the only inequality that matters is inequality of monetary incomes or wealth? (That this “Progressives” criticism of free-market economists is baseless is a subject for another day.)

5. And why do so many American Progressives, given their correct understanding that monetary values are not all that matter, treat differences in monetary incomes and wealth as sure evidence of economic malfunction? 

6. Why do so many American Progressives believe that ordinary Americans are far too incompetent to choose for themselves, each individually, the appropriate levels of safety for their automobiles, workplaces, and pharmaceutical products, but supremely competent to choose which political ‘leaders’ are best for the entire country?

7. Why do so many American Progressives revile business people who seek greater wealth by succeeding in commerce, yet revere politicians who seek greater power by succeeding in politics?

8. Why do so many Americans Progressives hurl accusations of “greed” at private citizens who wish only to keep for themselves more of the money that they’ve earned, yet celebrate as selfless and noble politicians who wish to take from private citizens money that these politicians did not earn?

9. Why do so many American Progressives tout the alleged virtues of locally “sourced” foods and of locally produced goods while incessantly pushing for more and more power over individuals and locales to be exercised in far-away state capitals and in even farther away Washington, DC.?

10. Why do large numbers of American conservatives believe that U.S. government tax hikes and other interventions into the American economy are ham-fisted and, hence, harmful to the American economy, yet believe that similar interventions by foreign governments into foreign economies are genius surgical operations that inevitably strengthen those foreign economies? 

11. Why do these very same conservatives also believe that the U.S. government somehow becomes capable of intervening successfully into the American economy if such intervention is advertised as being a response to foreign-government interventions into foreign economies?

12. Why do large numbers of American conservatives oppose taxes but support tariffs? Are these conservatives unaware that the latter is simply one of many different species of taxes?

13. Why do so many American conservatives boast about the strength of America and the resilience and greatness of her people but insist also that to allow these same American people to freely purchase goods and services supplied by low-productivity (and, thus, low-wage) foreign workers paves a sure path to America’s impoverishment and demise?

14. Why do so many Americans across most of the ideological space think they are offering sound and operational advice when they tell someone who is unhappy with existing government policies to “change” these policies by going to the polls to vote?

15. Why do so many Americans across most of the ideological space equate freedom with democracy? Do these Americans not see that oppression by a majority of one’s fellow citizens is oppression no less than is oppression by a minority of one’s fellow citizens?

16. Why do so many Americans, across most of the ideological space, who have ever waited in a line at the Department of Motor Vehicles to renew a driver’s license or to register a vehicle, or who have suffered long delays in a cavernous passport-control room to reenter the country after traveling abroad, want to turn over to the same institution that is responsible for the inefficiencies regularly on display in those government offices more control over our lives?

17. Why does not every American who has ever listened to a speech by a successful 21st century politician, or who has ever attended or tuned in to a “debate” among these office-seekers, come away from such an experience filled with terrible fear at the thought of any of these office-seekers exercising even the tiniest bit of say in the lives of ordinary Americans?

18. Why do so few American conservatives who were rightly appalled by Barack Obama’s performance in the Oval Office – and who rightly fear how that office would be abused by a President Elizabeth Warren or Joe Biden – wish to reduce the power of the presidency?

19.  And why do so few American Progressives who are rightly appalled by Donald Trump’s performance in the Oval Office – and who rightly fear an additional four years of Trump’s abuse of that office – wish to reduce the power of the presidency?

20. Why does the goal of restraining the power of government in all areas of life have so little political clout given that confidence in government is at historic lows?

As we briefly touched on last week, when it comes to Goldman’s market forecast for 2020, the bank is rather sanguine, stating that “slightly better growth, limited recession risk, and friendly monetary policy” should lead to a decent, but not stellar, background for financial markets in the early part of 2020. However, concerns about the impact of higher corporate taxes on profits could rise in the runup to the US presidential election, the bank added.

Overnight, in his 2020 US Equity Outlook, Goldman’s chief US equity strategist David Kostin shared some other key considerations how he sees the way forward in the equity market, as well as his year end forecast, which for the first time bifurcates into two explicit targets, depending on key variable.

Curiously, Kostin’s forecast bifurcates not only from an “event-risk” standpoint, but also chronologically and as the strategist writes, the “durable profit cycle and continued economic expansion” will lift the S&P 500 by 5% to 3250 in the early part of 2020. However, the rising political and policy uncertainty will keep the index range-bound for most of next year. “Goldman also reveals the bank’s baseline forecast for 2020, which he expects to rise by 6% to $174 in 2020 and by 5% to $183 in 2021. Yet here too Goldman reveals that things may change depending on whether or not Trump’s tax cut is reversed – in which case the bank’s baseline 2021 EPS estimate of $183 would be reduced by 11% to $162. Assuming the bill is applied retroactively to the start of the year, S&P 500 earnings growth in 2021 would equal -7%, compared with the baseline estimate of +5%.

Yet while there is uncertainty in the underlying EPS number, Goldman is even more cautious when predicting what the applicable multiple is that one must apply to this EPS number. All else equal, Goldman’s base case valuation forecast assumes the S&P 500 forward P/E “hovers around the current level of 18.0x for most of next year before rising to 18.6x following the election as uncertainty falls.” Furthermore, while historically valuations have moved sideways during the lead-up to presidential elections, they then move higher following Election Day.

However, this time the risk exists of a sharp multiple re-rating lower as the election result will affect equity valuations through changes in policy uncertainty and consumer confidence. here, Goldman uses its macro model of the yield gap between the S&P 500 earnings yield and 10-year US Treasury yield to estimate the impact of uncertainty and confidence on equity valuations. And while the bank’s baseline forecast assumes that following the election the S&P 500 forward P/E multiple expands slightly to 18.6x, if US policy uncertainty post-election rises rather than falls – read if a Democrat wins the election – or consumer sentiment declines, the equity risk premium would increase and the P/E multiple would compress by approximately 2 points to 16x.

What does this mean from a simple price perspective? Well, one can multiple one by the other and get the answer.

For those who can’t, Goldman writes that the election outcome “could magnify risks or the economic growth outlook could deteriorate”, by which it means Trump may not be re-elected. But more importantly should Democrats also regain sole control over Congress, “a unified federal government post-election could prompt investors to assume the tax cut is reversed and lower projected 2020 EPS to $162 (-7% year/year growth), compressing the P/E multiple to 16x consistent with an index level of 2600.“

And while Goldman’s price target “range” is indeed quite broad, the bank’s confusion appears to be prevalent because as Kostin notes, as investors consider the outcome of the election, the distribution of S&P 500 levels implied by the options market at year-end is wide: “The options market currently implies a 22% probability the S&P 500 ends next year above 3400 and a 28% probability the index ends 2020 below 2600.“

In other words, much like the Fed, Goldman appears to have taken its price target based on what the market is already discounting.

Here, Kostin points out something we noted last week when analyzing the latest report by Goldman’s derivatives strategist Rocky Fishman, according to whom the options market was indicating “different distributions of risk before and after Election Day.” Skew is higher for the September and October 2020 maturities than for the November and December 2020 maturities. This can be seen from the spike in upside implied volatility from October to December and little gap in downside implied volatility.

“This likely reflects investors positioning for a post-election relief rally once November uncertainty has been resolved.” Unless of course, the outcome is the worse case one that sees Trump tax cuts eliminated and the S&P tumbling by 16% from the bank’s mid-2020 target of 3,250.

Which brings us to the key issue at the heart of Goldman’s schizophrenic forecast: whether government will be united or divided. This is how Kostin frames it:

Maxims in politics such as “United we stand, divided we fall” do not necessarily hold in investing. In the United States, equity returns during periods of divided federal government have typically exceeded returns achieved when one political party controls the White House, Senate, and House of Representatives. Since 1928, excluding recessions, when the federal government was controlled by a single party, the S&P 500 median 12-month return equaled 9%. However, the median return under a divided government was 12%. Prediction markets currently suggest the most probable 2020 election outcome is a divided government.

The title of our 2020 US equity outlook, “United we fall, Divided we rise,” acknowledges the importance of an election that is slightly less than one year away. During the next 11 months, shifting electoral prospects of candidates will be  reflected in real-time prediction markets and sector and stock performance. During the subsequent two months, S&P 500 performance will depend on the actual election outcome.

When the election result has been a divided government, during presidential election years since 1928 the S&P 500 median return between the start of the year and Election Day has equaled 11% compared with a 4% return under a unified government election outcome. Obviously, this analysis assumes perfect foresight so it has limited usefulness as a forecasting tool.

As Kostin further adds, “investors focused on equity market implications of policies discussed on the campaign trail need to take into account the probability that these outcomes will be realized.” What this means is that a candidate would need to win the presidency, have the support of both chambers of Congress, and actually pass legislation.

Indicatively, online prediction markets such as PredictIt- which are notoriously illiquid and can be easily gamed with one modestly sized wager – currently assign a 74% probability that Democrats control the House, a 54% likelihood that they win the presidency, but only a 35% probability that they control the Senate.

And if the composition of US government is the dependent variable, the emerging two key risks to Goldman’s baseline forecast are tax rates and tariffs. Kostin explains:

The S&P 500 YTD effective tax rate has equaled 19%, well below consensus expectations for 21%. Analyst estimates currently imply a 21% tax rate in 4Q and in 2020. If the 2019 YTD pattern continues, it could mitigate likely negative revisions to consensus EPS estimates. However, several presidential candidates have proposed raising corporate tax rates, and we estimate every 1 pp change in the effective tax rate would lead to a roughly 1% change in S&P 500 EPS. Our model suggests a complete reversal of the tax cut would translate into 2021 EPS of $162 rather than our current estimate of $183. The impact of tariffs on profits remains highly uncertain. Recent reports suggest that pending tariffs may be delayed or rolled back. Currently, tariffs have been levied on roughly $370 billion of imports from China.

There are also a bunch of secondary variables, or macro drivers, which will be less dependent on the election outcome yet which will directly shape the path of the S&P 500: for example, higher interest rates and oil prices provide a boost to Financials and Energy EPS, respectively, but weigh on the profitability of companies outside of these sectors. Higher inflation boosts nominal sales growth but pressure margins, resulting in a modest impact on EPS.

There is one final, and far more intangible driver for next year’s returns: TINA, or whether investors will undergo what JPMorgan dubbed over the weekend a “Great Rotation” out of bonds and into stocks:

Equities generally appear attractively valued relative to the limited opportunity set in other asset classes. Bond yields remain extremely low across the world and our economists expect little change in global central banks’ monetary policies in 2020. Currently, 20% of global bonds trade with negative yields. Across asset classes, yields on the S&P 500 are comparatively attractive relative to cash (1.6% yield) and 10-year bond yields in the US and Germany (1.8% and -0.3%, respectively). Meanwhile, the S&P 500 offers a 4.2% FCF yield, a 4.8% total cash return yield, and a 5.6% earnings yield (see Exhibit 25). A rise in equity valuations would also be consistent with the past late-cycle environments; historically, the equity risk premium shrinks and valuations rise as the economic cycle matures (see Exhibit 26).

To summarize Goldman’s multi-modal model, no pun intended, the bank expects that as we approach the 2020 election, clarification of policy will expand the P/E multiple to 18.6x and – assuming a divided government – push the index to 3400 by year-end 2020. However, should the US end up with a unified government after the election, it will likely result in lowering 2021 EPS to $162 and compress P/Es to 16x, “resulting in the index closing next year at 2600.”

Here, Goldman lays out several other known unknowns which may derail its projection, among which further deterioration in US-China trade and tariffs, illiquidity, rising corporate leverage, reduced company buybacks, index concentration, antitrust investigations, and global economic growth. But the biggest risk of all is that this is a forecast coming from Goldman, whose forecasts in recent years have become the butt of jokes in less than polite financial company, of which one stands out above all: almost exactly a year ago, Goldman was predicting that the Fed would hike rates 4 times in 2019. Instead, the Fed not only did not hike even once, but it ended up cutting three times AND launched NOT QE. So anyone who traded based on Goldman’s 2018 forecast was crushed, and depending on leverage, may have lost all their money.

And with Goldman admitting that the outcome of its 2020 forecast is the functional equivalent to a cointoss, we urge only those professional gamblers investors who are ok with the S&P closing at either 3,400 or 2,600, a whopping 800 point delta, to do take the other side of Goldman’s prop trading desk, and trade based on the above forecasts.

Authored by Charles Hugh Smith via OfTwoMinds blog,

Strip-mining the planet to maximize profits isn’t progressive or renewable – it’s just exploitive and destructive.

How do we describe the finding that the planet’s most widely-owned super-corporation is destroying the planet to maximize its smartphone sales and profits? Shall we start with “inconvenient?” Yes, we’re talking about Apple, famous for coercing customers to upgrade their Apple phones and other gadgets if not annually then every couple years, as the most effective way to maximize profits.

Unfortunately, smartphones require stripmining the planet, as described in this report, Smartphones Are Killing The Planet Faster Than Anyone Expected Researchers are sounding the alarm after an analysis showed that buying a new smartphone consumes as much energy as using an existing phone for an entire decade.

Smartphones are particularly insidious for a few reasons. With a two-year average life cycle, they’re more or less disposable. The problem is that building a new smartphone–and specifically, mining the rare materials inside them–represents 85% to 95% of the device’s total CO2 emissions for two years. That means buying one new phone takes as much energy as recharging and operating a smartphone for an entire decade.

despite the recycling programs run by Apple and others, “based on our research and other sources, currently less than 1% of smartphones are being recycled,” Lotfi Belkhir, the study’s lead author, tells me.

The researchers point out that mobile apps actually reinforce our need for these 24/7 servers in a self-perpetuating energy-hogging cycle. More phones require more servers. And with all this wireless information in the cloud, of course we’re going to buy more phones capable of running even better apps.

Google, Facebook, and Apple have all pledged to move to 100% renewable energy in their own operations. In fact, all of Apple’s servers are currently run on renewable power. “It’s encouraging,” says Belkhir of these early corporate efforts. “But I don’t think it’d move the needle at all.”

As consumers, we have more reason than ever to hesitate when it comes to our next shiny tech splurge. The bottom line is that we need to buy less, and engage less, for the health of this entire planet.

This is true not just for Apple, of course, but for Samsung and other manufacturers, but Apple has the rose-tinted “progressive” reputation, and so we should start with Apple, which has always been particularly aggressive in crippling the functionality of older products with a variety of tried and true tricks to force customers to buy a new device (sorry, Bucko, your old phone can’t handle OS X.yz so it’s now a useless brick).

It’s not just CO2–smartphone components demand the expansion of environmentally destructive mining for essentials such as lithium:

Climate Change’s Great Lithium Problem: The future of technology metal mining in South America and elsewhere could look eerily similar to centuries of colonial exploitation, dressed up as environmentalism: American highways could buzz with Teslas traveling between sprawling suburban rooftops and office parks decked out in solar panels, all premised on capitalist profiteering and disregard for indigenous rights.

What would happen to Apple’s gargantuan profits were it to design, build and market smartphones and other devices to last a decade or longer? We all know what would happen: sales and profits would fall off a cliff, and hundreds of billions of dollars in stock market “wealth” would vanish as Apple stock declined to align with much lower profits and the end of the “endless growth” story.

(Apple enthusiasts claim Apple TV and other services will replace profits from phones, but at this point that is speculation without much supporting evidence.)

The disastrous environmental, social and political consequences of maximizing sales and profits regardless of “externalities” is not just Apple’s problem–it’s the entire developed world’s problem. As for Apple’s vaunted “renewable power”–the alternative energy technologies are not actually renewables, they’re actually just “replaceables,” in analyst / author Nate Hagens’ succinct terminology; solar panels and wind turbines must be replaced every 20 years or so, if not earlier, and as a result their lifecycle costs are permanently high.

What looks “paid for” in year 19 suddenly becomes expensive in year 21.

Stripmining the planet to maximize profits isn’t progressive or renewable–it’s just exploitive and destructive. “Renewable power,” blah blah blah– corporate PR is no replacement for making truly durable-for-a-decade products that drastically reduce the disastrous environmental, social and political consequences of ever higher growth chasing ever higher profits.

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